Ditch Your Resolutions — Set Financial Goals Instead

Now that the new year is completely underway, you might find yourself slipping on some of your resolutions. Maybe you’ve already given up.

Just because New Year’s resolutions aren’t your cup of tea, there’s no reason to avoid setting financial goals. No matter the time of year, these are good to determine and achieve.

Here’s why setting financial goals can be a good idea:

Goals Provide You With a Focus

Rather than setting a bunch of financial goals, decide on one aspect of your finances that you’d like to improve. Think about your financial priorities, and what you hope to accomplish.

Set a goal related to that priority. Your goal can help you focus on what you want your money to do — whether it’s boosting your retirement savings for the year, paying down debt, saving up for a down payment, or refinancing your home.

A financial goal gives you something on which to focus your energies. This focus can help you get more done. Map out the mini-goals that will lead to accomplishing your big goal, and then get to work. It doesn’t matter if you get off track a little bit, either. Use your goal to help you re-focus and get back into it. Whether it’s January or May, you can always focus on improving some aspect of your financial life.

Goals Help You Measure Your Progress

Without a benchmark, it can be difficult to say whether or not you’re improving. A goal can help you measure your progress. Set milestones, and then watch how you move forward. Being able to see your progress also has the effect of encouraging you to stick with it. When you’re discouraged, you can look at how far you’ve come, and then feel a renewed interest in moving forward again.

Make it a point to celebrate your milestones. You don’t need to have a big party or spend money on something expensive. But you can recognize how far you’ve come, and make it a point to mark the occasion with something a little extra. This gives you something to look forward to as you improve your finances.

Goals Help You Think Long-Term

Your goals can also help you think long term. Too often, we think too much about the short term, and we end up missing out on the benefits of long-term financial planning. Setting financial goals can help you think ahead.

While you might want to work on one aspect of your finances in the short term, you can also incorporate these goals into your financial plan. Your efforts to make goals now can support your future. Make long-term financial planning a part of your efforts, and your goals can help you achieve your dreams.

Bottom Line

Goal setting can be an important part of financial management. While you might not want to overdo it in terms of New Year’s resolutions, it’s still useful to look ahead and use financial goals to help you improve your situation.

I didn’t even bother to make any “resolutions” this year. I did sit down and decide what things I had to remove from my plate, as opposed to add, in order to live a more fulfilling life.

This year I focused on getting out of debt (we have some medical bills). Every month I focus on how many payments I have left on each account; which ones will be paid off soon; and which ones I can apply the extra to once the others are paid off. I see a few coming to an end (in the next month or two) and I know there is light at the end of the tunnel now.

You have to make a plan. Plain and simple. Goals turn dreams into reality.

The great thing about financial goals as opposed goals in some other areas of your life, are that they are very easy to measure. You can be very specific about what you wish to achieve and you can precisely measure the progress.

One simple exercise that you can do is to begin tracking your own finances on a regular basis. Draw up a simple spreadsheet with your assets in one column and liabilities in another, and then subtract one from the other to give you an idea of your net worth. Track this monthly or quarterly using the same layout to see whether you’re net worth is heading in the right direction.

Sounds simple, though you would be surprised how few people actually do such an exercise with their personal finances.

I had made a resolution this year to start saving more money for whatever comes up but it hasn’t happened yet. I will soon be going through my finances with a fine tooth comb and see what can be cut out and moved to savings.

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